How do you price your customer education (CE) programs? Do you have a strategy you use to assess the value of the program, the cost of the delivery method, and market competition?
Early stage enterprise software companies may decide to offer it for free because it's "part" of the service you're offering and your customers "expect" it to be built into the subscription price. Is this the best approach? Once you start offering your training for free, it will be much harder to convince customers that they need to pay for it later.
In reality, customers are willing to pay for training if they can clearly see the value they get from it, so let's look at some pricing strategies you can use to price your customer education programs effectively and generate more revenue for your organization.
Before diving into your overall pricing strategies, make sure you understand the following elements:
Calculate your production costs: Determine what it costs to create and deliver a course, what to charge for it, and how many enrollments do you need to sell to break even.
Understand what the market's doing: Investigate what your competitors are doing with their training: how do they position it, how it compares to yours, and what it costs.
Estimate the demand for your training: This is a hard one to determine, especially if you've just started offering customer education programs. However, if your customers have been asking for training, you can estimate the demand based on those requests. The sooner you get a handle on the demand curve, the more strategic you can build your pricing model. As you sell more programs over time, you'll be able to estimate demand more accurately based on current sales.
Three pricing strategies for customer education
Now that you've done the homework, it's time to look at three pricing strategies for your CE programs: pay per course; membership; and price discrimination.
1. Pay-per-course pricing
This is the classic pricing strategy, where customers buy individual courses as needed at a set price. It's a simple strategy for customers, as they're not locked in a large education contract and they're more apt to buy. You'll generate immediate revenue and it's easy to measure and forecast future demand. You'll be able to see which courses are the top sellers, which aren't, and can invest resources into creating more of what's selling.
Customers can pick and choose the courses to take, designing their own custom curriculum based on the knowledge gaps they have identified they need to fill. This increases their student engagement with the training, enhances their product expertise and ultimately, drives up the adoption and usage of your products.
2. Membership pricing
Offering an all-inclusive training membership delivers a cost-efficient model to large organizations who want to provide their employees with unlimited access to your entire training library. To prove the value and show the ROI of this price model to your customers, simply divide the overall membership cost by the number of courses or the number of employees or the total number of hours of instruction. It's also a good differentiator for you in the market, especially if your competitors are only offering pay-per-course models.
The membership offers ongoing, predictable revenue to your organization. Depending on your LMS, you'll also be able to see which courses are popular with customers and which aren't, giving you transparency into forecasting and CE resource investment for the future.
3. Price discrimination strategy
Price discrimination is a pricing strategy that "charges customers different prices for the same product or service, based on certain group (or market) attributes." That means you're pricing identical goods at different prices to different customers.
This strategy requires a little more time to use effectively, as you need time to determine the price point for each of your customer types. For example, there are price-conscious customers who will never pay over a certain amount for training, while others are not concerned at all about the price. Some customers have large budgets and a culture of investing in training, while others have no budget and only ever buy training as a last-ditch effort to retain employees.
To use this strategy, you'll need to set a different base price for each training product type you have and then adjust as necessary. For example, a single course could be taught through eLearning; via live training with an instructor (in-person or online); as a public or private session; or as a customized course for a particular customer. The content of the course is largely the same, it's just the delivery method that's different.
General guidelines for price discrimination pricing
- Low cost: Self-paced, eLearning is the least expensive level, as it costs nearly nothing for you to deliver and typically helps customers with basic knowledge transfer.
- Medium cost: Public, virtual, instructor-led learning is a medium-priced level, because while it's just as easily scalable as self-paced learning, customers get the benefit of interacting with a live instructor.
- Medium-high cost:
- Public, live, in-person learning is a higher-priced training level, as there are limitations to it for both the instructor and the customer (classroom size and travel restrictions being the two biggest ones). However, students get a more intimate experience with a knowledgeable instructor, so it should be priced accordingly.
- Private, virtual, instructor-led learning is another higher-priced training level because of the privacy of the session and the costs associated with the instructor, location, etc.
- High cost:
- Private, on-site learning is one of the priciest training levels as it adds the personal, high touch experience some customers prefer.
- Custom training is the most expensive training level because you are changing your standard course curriculum to t your customer’s specific training needs. The price for custom training is similar to the private, on-site training costs, but also includes the time it takes to customize the training.
Notice we didn't talk about offering any free training in our pricing model recommendations? That's because for many software organizations, free training is hard to monetize later on. Customers are so used to getting the information for free that they may balk at paying for it later.
Of course there are success stories from companies moving from a free to paid training model (namely Docker, a ServiceRocket customer), but it really depends on your market and product offering. Docker was able to make the switch because their product is actually a freemium offering; customers expected to be able to learn for free since their software was also free. They make their money through enterprise-level product bundles, which is what they did with their training too. All of the lower-level courses are free to take, however to get certified in the various levels of Docker workflows and products, customers need to pay for the training.
Final thoughts on customer
Training has value for customers, most are even willing to pay for it, so it makes sense for you to have a documented CE pricing strategy to price it accordingly. You want to make sure you're pricing it "just right" so you're earning enough and generating a revenue for your CE function. Try these three strategies to find that price and tweak it as necessary. The more you sell, the more information you'll have to make any necessary changes.